Meeting of the Parliament

Meeting date: Thursday, November 16, 2023

Official Report 1141KB pdf

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Clyde and Hebrides Ferry Service

The next item of business is a statement by Fiona Hyslop on the Clyde and Hebrides ferry services contract. The minister will take questions at the end of the statement, so there should be no interventions or interruptions.

14:56  

I am grateful for the opportunity to make a statement on the delivery of the next Clyde and Hebrides ferry services contract, which is one of the biggest contracts that the Government oversees. I am acutely aware of the importance of these lifeline services for our island communities, and I am committed to delivering an appropriate replacement for the contract, which is due to expire at the end of September 2024.

I recognise that the resilience and reliability of the services has been subject to a great deal of scrutiny, both in this building and, crucially, by the communities that they serve. The next CHFS contract is vital to our efforts to drive improvements across the network; therefore, we must carefully consider the optimum model, hence the time that has been taken to arrive at this decision.

I was struck by a comment from the chair of the ferries community board who, in evidence during the Parliament’s Net Zero, Energy and Transport Committee’s inquiry, the report of which we debated last week, said:

“One thing that we have to break from is having an operator being told just to do a timetable. That results in no recognition of need or of what the service should be. It stops flexibility”.—[Official Report, Net Zero, Energy and Transport Committee, 31 January 2023; c 48.]

The concept of flexibility must be key to any future process, ensuring that we can tailor service levels to effectively respond to community needs.

As I highlighted in the debate last week, the Government has no plans to unbundle or split up the network. We have considered two options for contractual arrangements to ensure the continued operation of the services: either a direct award to the current operator, in what is known as a Teckal arrangement, in accordance with the Public Contracts (Scotland) Regulations 2015, or a competitive tender on the open market. Having considered the benefits and risks of each, I want to update the Parliament on Scottish Government ministers’ preferred way forward, which is to explore a direct award.

I want to be clear that, before any final decision is taken, a due diligence process will establish the feasibility of the approach from a financial, operational and legal perspective. In terms of value and importance to our island communities, this is one of the most significant contracts that the Government will enter into, and it is vital that we get it right.

As I have said, there are a number of complex issues to be resolved before committing to a final decision, including subsidy control, individual entity status and associated accounting requirements. However, I assure members that those will be examined via a thorough due diligence exercise that is supported by specialist advisers. I expect the exercise to be completed to allow a final decision to be made by next summer.

Central to the process, ministers will seek assurance that a direct award would offer a value-for-money solution. Subject to a satisfactory outcome, we would then commence the necessary steps to facilitate a direct award. Should the process result in a decision not to proceed with a direct award, we would revert to a competitive tendering process on the open market.

In the meantime, I assure our island communities that I will continue listening to those who have rightly asked for improved resilience, greater transparency, better communications, responsiveness and sensible flexibility in the service and for more certainty for communities, service users and staff. We will continue engaging with all our communities and stakeholders to inform the development of the new contract and to ensure that, regardless of the ultimate procurement route, we capture the improvements that we all want to see.

I understand community expectations for the service and make this absolutely clear: if we decide ultimately to make a direct award, that would not, under any circumstances, simply mean business as usual. Going down the direct award route would help to change the ethos of the service by shifting the focus, from a commercial arrangement to a model that is more focused on the delivery of a public service, which would help to create a more agile approach to drive the service improvements that we all want to see. Not least, we are determined to improve communication with communities and will look to introduce meaningful performance indicators that better reflect their experience of using the service. We will aim to have the new arrangement in place by 1 October next year, meaning that we can start to see benefits for our communities as early as possible.

In addition to better operational communication, a direct award would provide us with the opportunity to consider adding CalMac Ferries as a relevant authority under the Islands (Scotland) Act 2018, strengthening the ability of communities to feed into impact statements and assessments to inform proposed future changes.

I recognise that we cannot rely solely on the contract procurement route as the mechanism for driving improvement. That is why it is only one among a number of measures that this Government is taking to improve Clyde and Hebrides ferry services for islanders and visitors alike. The contract award preferred route sits alongside the island connectivity plan, the fair fares review and the future of governance. We are working to introduce a range of policy measures, alongside significant investment in new vessels and infrastructure.

We will continue progressing the islands connectivity plan, with two key documents due for public consultation later this year: a draft strategic paper on wider connectivity issues and a draft long-term plan for vessels and ports, which updates the paper that was published last year. Our fair fares review will also report soon. Following the success of the road equivalent tariff, we want to consider a fares policy that is affordable and sustainable for both ferry users and Government.

On the issue of governance, and following the project Neptune report on options for change, we have spoken extensively to island communities and stakeholders and it is clear that they want a structure that is more transparent, accountable and customer-focused. A direct award would be supported by governance that best supports our goals for the service and must reflect the culture and ethos required for running a public service.

There have been calls for mergers and I am conscious that reform can be unsettling for staff. Change must and will happen to improve accountability and transparency, but form must follow function. I can confirm today that I am not taking any immediate decisions on governance or the merger of bodies, because I want organisations to focus on delivery of the new contract, on the operation to bring the various large vessels into service from next year and on the small vessel replacement work.

Should the final decision of the due diligence exercise be for a direct award, that may also have an impact on decisions on governance structures. I give an assurance that we will work with the relevant organisations, trade unions and other stakeholders to identify the optimum final governance arrangements.

As minister, I have had a unique opportunity to engage with a wide range of stakeholders and to listen to their experiences of the ferry service. Although one of the key recommendations made by the Net Zero, Energy and Transport Committee was for a direct award, I recognise that others may prefer a competitive tender. I know that a direct award might not be welcomed by every community and that we will be judged on the improvement that is delivered. I again reiterate that keeping the status quo of current service levels is not an option. I expect a direct award to be a catalyst for change, leading to a more efficient and flexible model for the delivery of this public service.

Alongside the construction of new vessels and infrastructure, I also wish to see—this is crucial—a new management culture emerging: one that is more supportive of the communities, customers and passengers who are served by the network; that provides greater transparency in communications; and that strives for continual improvement through an innovative and responsive approach.

I turn to the next steps. Regardless of the procurement route that is ultimately chosen, the next CHFS contract will not be developed in isolation. I will continue to speak to communities and stakeholders to ensure that we have a service that delivers for them. Later this month, my Transport Scotland officials will hold a series of engagement events on Arran, Mull, Islay, Skye and Lewis. Those events will be followed by a public consultation that will commence in December. Further engagement is also planned over the coming months, and I encourage everyone with an interest to help us to shape the future of these vital services.

In addition, consultation will be undertaken on the islands connectivity plan, which will provide the opportunity for communities and stakeholders to comment on the proposals.

In relation to the wider network, I am aware that the northern isles ferry services contract is due to expire in 2028. Those services are different in nature from the Clyde and Hebrides services. That being the case, I can confirm that our current intention is for the next generation of that contract to be procured via the open market.

Finally, I would like to conclude by thanking those—especially the communities—who continue to inform our plans for the future of the Clyde and Hebrides services. I hope that the Parliament can agree that, taken alongside the other initiatives that I have outlined this afternoon, Government ministers’ preferred approach of a direct award would provide us with greater flexibility to drive improvement for the benefit of our island communities.

The minister will now take questions on the issues that were raised in her statement. I intend to allow up to 20 minutes for questions, after which we will need to move on to the next item of business.

I thank the minister for advance sight of her statement.

Islanders who were hoping for some clarity on how ferries will be run, by whom and for how long, will be bewildered by what has just been said. Scotland’s ferry system is not working, our ageing ferries are unreliable, and the procurement and confused governance system is not fit for purpose.

The minister said that the status quo is not an option. I agree, but it is difficult to see how anything that has been announced today is anything but the status quo. Perhaps the minister can explain how it is. Far from announcing a new model that would give hope to islanders, the minister has kicked the can down the road. She said that she wants to explore a direct award to CalMac. With the current contract fast running out, maybe she feels that that is the only route left. How long does she want the next contract to run for? She did not say. If a direct award is not allowed, how quickly can a new tender process be completed?

The minister has previously said that she believes that the tripartite structure should change, so why has she not made a decision on a new arrangement? Does she not recognise that any such change should go hand in hand with a new contract award?

It is clear that resilience and reliability are key to improving services. The six new vessels that we will have by 2026 will help to provide that resilience.

The new contract would be implemented from October next year. A tender arrangement would take much longer. Could a tender arrangement be achieved? Yes, it could, but only by extending the existing contract, which would mean that the existing contract would last longer. It is the existing contract that we want to change in order to drive the improvements that we seek.

On the governance arrangements, Graham Simpson is correct that I want change. I said that to him in the chamber only last week. However, there is an order in which decisions and assessments need to take place to ensure that the financial, legal and other requirements that will have to be met are dealt with in a logical way, and to ensure that the final decision is a sensible one that will meet the needs of the contract that we are awarding. There is an order to what we are doing, and the work that we are doing is comprehensive.

I assure Graham Simpson that I want change and that I do not want to kick the can down the road, which is exactly why I will change the contract as of October next year, should due diligence allow us to do so before we make the final decision next summer.

I welcome the statement from the Minister for Transport. We believe that a direct award of the contract is the correct way to move forward.

I note that the minister said that, moving forward, it will “not” be “business as usual.” Again, I welcome that statement. We know that islanders feel very badly let down, and there have been many calls from islanders for them to have a greater role in the management and running of their lifeline services. Labour agrees with those calls.

What action will the Scottish Government take not just to consult islanders and staff, but to ensure that they are much more involved and have a greater say in how the services are run and managed? Will there be places on the board of CalMac for islanders and trade unions? Finally, is the minister looking at a 10-year contract?

I welcome the Labour Party’s support for a direct award. The greater role of communities in shaping the content of the new contract starts immediately. That work starts now, and the new contract will emerge, regardless of whether it is a direct award or a tender.

On the question of islanders being on boards, that has already started to happen, but I think that there can be more movement. I am also sympathetic to the point about trade union representation. Again, part of what I will need to do is work with the organisations concerned in terms of delivery and the change. There will need to be a number of changes in relation to the operation of CalMac for it to be kept Teckal compliant; a number of changes would need to be made at the same time. However, change starts now. I do not want to wait change to happen years down the line. I want to see it happening, and it can happen from next year if we follow this route.

What will the Government do through any directly awarded new contract to hold CalMac senior management’s feet to the fire, given the widely expressed concern that, under the existing contract, the leadership of the company has at times felt remote from the communities that it serves?

Alasdair Allan makes a very important point. He has been assiduous in pursuing the issue on behalf of his constituents. A direct award would allow service delivery to be more flexible. On the changes that are required, there needs to be a change in the management culture and ethos, and relationships with key communities and customers are critical to that. They are not just running a timetable; they must run a public service.

I reiterate that part of that direct award, should it be delivered, will need to be a Teckal compliant approach by the board and management, which will also directly involve Government. That would also support the approach by providing a more direct role and the influence to do exactly what Alasdair Allan has asked for.

The minister said that a direct award might not be welcomed by every community. There is good reason for that suspicion and nervousness. Among the benefits of the competitive tender process the last time CalMac won the award was that it had to make 350 commitments to improvement, as part of the contract.

First, have all those 350 commitments been delivered over the past five years? Secondly, which is more important, will the new contract have specific key performance indicators for service delivery that come with penalties, as is the case with ScotRail, for example?

Jamie Greene has made an important point. I will need to revert to him on the detail of the 350 commitments, but his point about driving change is really important. There will be KPIs, and the change will be about customer delivery and, importantly, customer experiences.

He is quite right to draw attention to the situation of ScotRail, which has greater focus on customer service in what it delivers. That is the kind of approach that I want to see. The development of the contract, with KPIs, will start later this month, with my officials speaking to the communities that I mentioned earlier.

I remind Parliament that my wife works part time for CalMac.

I welcome the statement, which I am sure will also be welcomed by CalMac staff. However, what assurances can the minister provide that CalMac’s headquarters in Gourock is secure? Does the statement have any implications for staffing at the headquarters?

If the contract is directly awarded to CalMac, that would offer all CalMac staff the certainty and stability that I know the trade unions have been requesting. I make it clear to members that the location of the headquarters is a matter for CalMac management. However, I know, because I have heard it directly in the chamber, that Stuart McMillan will continue to make the case for his constituency and constituents on that matter.

I, too, would welcome a direct award. However, to run lifeline services—which always should be run as public services—we need ferries that are fit for purpose. Can the cabinet secretary tell us when the Scottish Government will publish a ferry replacement programme in order to provide the lifeline services that our islands require?

I repeat that the ferries that we are expecting are the Glen Sannox in spring next year, with a view to its commencing service in the summer, and the Glen Rosa in May the following year. For the Islay vessels, we are looking at October 2024 and February 2025, and for the Little Minch vessels, we are looking at June 2025 and October 2025.

Rhoda Grant might be referring to the small vessel replacement programme. As I said in my statement, as part of the islands connectivity plan, we will publish the long-term vessels and ports infrastructure plan. That might be what the member is talking about. That will be an update on what was produced in December last year. It should give the member some indication not just of the vessel replacement programme, but of what will happen in relation to ports and harbours, because it is clear that the infrastructure is just as important in relation to our ensuring that we continue with on-going investment to support the ferry service.

The minister spoke about changing the management culture, which is certainly long overdue. Can the minister advise what steps will be taken, if there is a direct award to CalMac, to ensure that it includes a duty to engage and communicate effectively with community representatives; a duty to deliver greater customer focus and ethos; and a restructuring of CalMac’s management to ensure that it clearly puts the travelling public first?

I know that Kenneth Gibson—who also has been diligent in representing his constituents on the issue—will be reassured by what I expect of the contract. I do not wish to prejudge what the communities want in the contract, but I would be surprised if the elements that he has just described were not in the contract. Let us see the work that emerges.

With regard to a new management culture emerging, it has to be supportive of customers and passengers, and there must be greater transparency in communication and relationships. In delivering that, the community voice must be central to the future of the service.

It is also worth stressing that CalMac is not currently a relevant authority under the Islands (Scotland) Act 2018, so we would seek to change that.

The minister knows that no new contract will overcome years of underinvestment in the ferries. However, will the new contract, or any new contract, include better compensation arrangements for businesses, in particular those on the islands, so that they are never again left high and dry, with months—in fact, years—of interrupted services?

We continually hear about the pressures on businesses, which Kenneth Gibson also raised at First Minister’s questions, because of the issues with regard to unreliability and resilience.

Resilience is part of providing continuity of service, and it will be much easier with six new vessels by 2026. The implications of that should mean that there is a greater opportunity for resilience, in particular in the winter months, when the overhaul, servicing and dry docking of a number of vessels is required to take place from a safety point of view. That will provide more stability for the service, so we would not expect questions and issues of compensation to arise in the future.

Nevertheless, I am acutely aware, not least as the former Cabinet Secretary for Culture, Tourism and External Affairs, that any interruption of business has a severe impact on businesses. That is why I have been talking to the current Minister for Small Business, Innovation, Tourism and Trade about what support can be given in particular to help to generate more support for businesses and greater promotion of tourism, once we know that the reliability and resilience of the ferry service can be resumed.

My understanding is that the last time that the contract was put out to tender, Transport Scotland received only one compliant bid for the Clyde and Hebrides ferry contract. What determines whether a bid is compliant, and what due diligence does the Scottish Government undertake to arrive at its determination?

Our decision is not to go out to tender. The issue with the last tender was that the market was in a different market. However, even at that stage, there were issues around the minimum technical, financial and legal requirements for participants. If the contract goes to tender, those requirements will be clearly specified in the pre-qualification phase. Where any aspect of a bid is found not to meet the specified criteria and requirements that are set out in the tender documentation, that bid may be deemed as non-compliant. Before rejecting any bid as non-compliant, the specific circumstances would be carefully considered, but that is not the route that we are taking at this stage.

Under the existing contract, it is island communities that continue to suffer from problems in our ferry service. The minister may be aware that there will be no Monday sailings from Colonsay to the mainland for the duration of the winter timetable. In effect, there will be a 25 per cent reduction in services over 21 weeks. What action will the minister take to ensure that Colonsay residents have access to a full service during that period?

That is not a direct question on the statement that I have made today, but I am happy to try and address it. Like Donald Cameron, I was concerned to hear the news about that disruption. Again, that is an issue related to resilience and the required servicing of vessels during the winter dry docking and servicing period.

I may be wrong and the quote may be incorrect, but I was somewhat amused to see quoted that decisions have been made on behalf of Transport Scotland and by proxy of Government as to whether, for example, some kind of passenger plane or charter could help to provide resilience. I have asked my officials to look further into that.

The islands connectivity plan will look at wider connectivity issues. For example, in Orkney, we have been asked by the council whether it could use some of its funding for ferries—which are obviously council-run, but for which we provide revenue support—for replacement flights in some circumstances. Obviously, as we move to more sustainable flights, that may increasingly become an option in some areas.

I appreciate the question. I cannot give a direct answer, but I am aware of the issue.

I thank the minister for her statement and commend her on the intention to make a direct award. If she manages to achieve that, she will be the first transport minister to do so, as no previous Government has been able to do that—I speak as the person who let the last contract.

The contract is a very important step in the future of ferry provision on the west coast. While the details and the process are being decided on, there are, of course, still ferry services that island communities rely on. I am encouraged by the minister saying that she intends that those improvements should start now. Can she say anything further than what she has already said on the steps that the Government will take to ensure improvements in service and the resilience of the fleet in advance of the contract being let?

I believe in continuous improvement. On the latter point, it was the direct intervention of the Cabinet Secretary for Transport, Net Zero and Just Transition that led to the consulted-upon change to the winter programme to ensure resilience, so that no one community would be left without a service for any extended period of time, which had been experienced previously. The attempt at continuous improvement has had a direct impact already.

Keith Brown made the point that other ministers may have sought to make a direct award. I do not know whether he said that I was brave, but we are not through this yet. This is the first part of a two-part process. In relation to my determination for change, the due diligence exercise—which will be conducted by experts—to advise us on the final position is really important. Until we get that due diligence, I cannot give members a final decision, but it will be a final decision that will lead to improvement sooner rather than later.

I thank the minister for her considerable work on making improvements in our ferry services.

Earlier this week, CalMac published its annual vessel overhaul plans and announced a three-week increase in the number of overhaul days for its ageing fleet. What assurances can the minister give to rural and island communities that progress on maintenance will be closely monitored, and how will a direct contract award in the future ensure that the voice of the rural and island communities that depend on those services is heard and responded to?

Winter resilience and maintenance are critical to the service. Again, that is an issue that may or may not be addressed under the terms of contract. CalMac recognises that this winter’s overhaul is particularly pressured. It represents a challenge to communities, and it is a challenge to staff to manage the various periods when vessels are out of service because they are getting their annual overhaul. However, the position will improve with the delivery of the new tonnage: there are the six new vessels that are coming through, and the MV Alfred has been chartered for a further six months to help to provide additional support to services for the remainder of the overhaul period.

As I mentioned in my answer to Mr Gibson, I want the community voice to be central in the future of the service. That is an important role for the ferries community board.

I am going to try to get in the two remaining members who want to speak. I would just advise the chamber that the clock is not correct—we should be finishing at 18:40. I will allow the questions, but they need to be brief, as do the responses.

I welcome the statement and refer to my entry in the register of members’ interests relating to attendance at trade union events.

Could the minister confirm the role of the specialist advisers in on-going work to explore direct award? Ernst & Young failed to involve trade unions in its work for project Neptune. What is the role of those private consultants? Given the importance of unions, islanders and others, will they be consulted over a legally compliant direct award?

I hope that we are not running to 18:40, Presiding Officer.

Katy Clark makes an important point, because the issue of due diligence is related to legal and accounting aspects and, in particular, to constitutional arrangements that may or may not be required. I reassure the member that, depending on when decision time ends, I am due to meet the trade unions this evening to discuss my announcement today.

We have heard that the northern isles contract runs to 2028 and will go to open market, but the CalMac contract is direct award. Why the difference?

The contracts, and the services provided, are quite different. The northern isles ferry services are much longer and there are fewer of them. I think that the NIFS contract should be available for tender in the future. That is the current decision but, as we approach 2028, we will be making a final decision about that. In terms of the original tender, it is a different service. I think that the CHFS will benefit from a Teckal-compliant direct award. That is why we are pursuing the due diligence, and the steps that are needed to develop that new contract and deliver the changes that we all want to see.

That concludes that item of business. There will be a brief pause before the next item of business, to allow a changeover of front-bench teams.